The majority of housing markets remain affordable to the average
family, but rising mortgage rates and rising housing prices are causing
more families to have to stretch financially, according to Freddie Mac’s
U.S. Economic and Housing Market Outlook for December.
“Rising mortgage rates and rising housing prices over the past six
months are making it more challenging for the typical family to purchase
a home without stretching beyond their means, especially in the
Northeast and along the Pacific Coast,” says Frank Nothaft, Freddie
Mac’s chief economist. “Like most, we expect mortgage rates to rise over
the coming year, so it's critical we start to see more job gains and
income growth in the coming year. This will help to keep
payment-to-income ratios in balance -- an important factor not only for
first-time buyers but for sustaining homeownership levels among existing
owners."
According to Freddie Mac’s report, more than 70 percent of the
nation’s housing stock remained affordable to the typical family in the
third quarter at a 4.4 percent interest rate for a 30-year fixed-rate
mortgage. However, that percentage decreases to about 63 percent at a 5
percent mortgage rate; 55 percent at a 6 percent interest rate; and 35
percent at a 7 percent interest rate.
Source: Freddie Mac
Showing posts with label mortgage rates and changes. Show all posts
Showing posts with label mortgage rates and changes. Show all posts
S & P Outlook for U.S. Housing
The U.S. housing market continues to show signs of recovery,
outpacing the relatively weak U.S. economic recovery. Standard &
Poor’s baseline forecast assumes that the U.S. economy will continue to
grow slowly in 2013, avoiding any substantial negative economic impact
from the looming fiscal cliff and growing federal deficit. The U.S.
economy grew 3.1% in the third quarter of 2012, up from 1.3% the
previous quarter, and the unemployment rate declined to 7.7% in November
from 8.7% a year ago. Both are moving in the right direction to support
continued housing recovery in 2013. We believe that as long as the U.S.
remains in recovery mode, U.S. housing fundamentals will continue to
improve, bolstered by low interest rates and rising home prices. Taken
together, we expect these trends to support improving consumer
confidence and lead to a return to historical housing supply-and-demand
fundamentals.
Our baseline forecast for housing assumes that U.S. national home prices (which rose 7% through the first nine months of 2012) will rise 5% in 2013, after a few months of seasonal weakness at the start of the year. Moderate economic growth, federal refinancing and loan modification programs, low mortgage rates, rising household formation, and limited new supply will contribute to price recovery, in our view. However, tight lending remains a key concern for housing demand because the limited availability of credit could weigh on borrowers.
Although the GSEs (government-sponsored entities, such as Fannie Mae and Freddie Mac) have been vital players in the U.S. mortgage finance market, 2012 was a strong year for mortgage banking, largely because of refinancing activity. This trend will likely continue in 2013, but banks may struggle to duplicate strong performance next year. Many non-bank finance companies have expanded their portfolios through servicing transfers at the cost of others exiting the business.
An improved outlook for housing, along with higher home prices, could increase the availability of mortgage credit and ease lending constraints, allowing borrowers with lower quality credit histories to refinance. More than 1.3 million borrowers have moved from negative to positive home equity in 2012, because of rising home prices. Homeowners with positive equity are able to refinance, taking advantage of the current very low interest rate environment. With more affordable mortgage payments, and some equity in their homes, consumers are less likely to default, which we view as positive for housing supply fundamentals. On the demand side, the rise in household formation over the past year is also positive for housing demand, in our view.
The impact of a recovery in housing fundamentals varies across the many housing related sectors and securities that we rate. While we expect all sectors to benefit from an improved housing forecast, the pace and depth of the improvement will depend on many factors, including each sector’s ability to participate in the recovery and their exposure to legacy portfolios and markets.
Banks’ Mortgage Earnings Will Moderate In 2013
Mortgage banking was a bright spot for banks in 2012, as refinancing volumes rose with the help of government programs and low borrowing rates. Banks may struggle to duplicate that strong performance in 2013 because the pool of borrowers eligible to refinance is shrinking, though rates are likely to remain low, and supportive government programs remain in place. Credit losses from residential mortgages continued to decline during the year, though the number of problem loans remains high and will continue to contribute to elevated losses in 2013 across the industry. Litigation risks for banks related to mortgage exposures grew in 2012 and are likely to continue to weigh on the industry in 2013 as state and federal regulators and investors seek to recoup losses from the past few years. Overall, the legacy residential mortgage exposure of banks should continue to weigh on results, but that drag on earnings and capital should continue to slow.
Homebuilders Benefit From Demand For New Homes
Buyers for newer homes returned to the single-family home market in 2012, resulting in better than expected operating results for most of the homebuilders we rate. Sales volumes and average selling price exceeded our initial expectations, and we currently expect that the homebuilders we rate will deliver on average 20% more homes in 2012 compared with 2011. Most new homebuilders have also posted healthy increases in average selling prices, outpacing overall market trends, as buyers gravitated toward competitively positioned new home communities and the supply of existing homes for sale has remained very low.
Despite our expectation that favorable housing demand and supply fundamentals will continue to support strong revenue and EBITDA growth in 2013, our outlook on the homebuilding sector remains stable. Improved fundamentals reduce downside risk in our view, particularly for the lowest rated companies, but we expect upside rating momentum will likely be more muted as homebuilders draw down their sizable cash balances (a primary support to liquidity over the past few years), and raise additional debt capital for future land and inventory investment in anticipation of higher sales volumes. The effect of this additional debt issuance will likely slow the leverage improvements necessary for more positive rating actions over the next 12 months.
We also remain concerned that the impact of a potential recession in the U.S. would be more significant for homebuilders than many other sectors, since a drop in consumer confidence would likely derail buyers’ appetite for large discretionary purchases such as single-family homes. In addition, decisions on numerous regulatory and policy initiatives that would have an impact on housing are slated for the first half of 2013, many of which could significantly affect the availability and cost of mortgage financing.
Click here, to read the full report.
Our baseline forecast for housing assumes that U.S. national home prices (which rose 7% through the first nine months of 2012) will rise 5% in 2013, after a few months of seasonal weakness at the start of the year. Moderate economic growth, federal refinancing and loan modification programs, low mortgage rates, rising household formation, and limited new supply will contribute to price recovery, in our view. However, tight lending remains a key concern for housing demand because the limited availability of credit could weigh on borrowers.
Although the GSEs (government-sponsored entities, such as Fannie Mae and Freddie Mac) have been vital players in the U.S. mortgage finance market, 2012 was a strong year for mortgage banking, largely because of refinancing activity. This trend will likely continue in 2013, but banks may struggle to duplicate strong performance next year. Many non-bank finance companies have expanded their portfolios through servicing transfers at the cost of others exiting the business.
An improved outlook for housing, along with higher home prices, could increase the availability of mortgage credit and ease lending constraints, allowing borrowers with lower quality credit histories to refinance. More than 1.3 million borrowers have moved from negative to positive home equity in 2012, because of rising home prices. Homeowners with positive equity are able to refinance, taking advantage of the current very low interest rate environment. With more affordable mortgage payments, and some equity in their homes, consumers are less likely to default, which we view as positive for housing supply fundamentals. On the demand side, the rise in household formation over the past year is also positive for housing demand, in our view.
The impact of a recovery in housing fundamentals varies across the many housing related sectors and securities that we rate. While we expect all sectors to benefit from an improved housing forecast, the pace and depth of the improvement will depend on many factors, including each sector’s ability to participate in the recovery and their exposure to legacy portfolios and markets.
Banks’ Mortgage Earnings Will Moderate In 2013
Mortgage banking was a bright spot for banks in 2012, as refinancing volumes rose with the help of government programs and low borrowing rates. Banks may struggle to duplicate that strong performance in 2013 because the pool of borrowers eligible to refinance is shrinking, though rates are likely to remain low, and supportive government programs remain in place. Credit losses from residential mortgages continued to decline during the year, though the number of problem loans remains high and will continue to contribute to elevated losses in 2013 across the industry. Litigation risks for banks related to mortgage exposures grew in 2012 and are likely to continue to weigh on the industry in 2013 as state and federal regulators and investors seek to recoup losses from the past few years. Overall, the legacy residential mortgage exposure of banks should continue to weigh on results, but that drag on earnings and capital should continue to slow.
Homebuilders Benefit From Demand For New Homes
Buyers for newer homes returned to the single-family home market in 2012, resulting in better than expected operating results for most of the homebuilders we rate. Sales volumes and average selling price exceeded our initial expectations, and we currently expect that the homebuilders we rate will deliver on average 20% more homes in 2012 compared with 2011. Most new homebuilders have also posted healthy increases in average selling prices, outpacing overall market trends, as buyers gravitated toward competitively positioned new home communities and the supply of existing homes for sale has remained very low.
Despite our expectation that favorable housing demand and supply fundamentals will continue to support strong revenue and EBITDA growth in 2013, our outlook on the homebuilding sector remains stable. Improved fundamentals reduce downside risk in our view, particularly for the lowest rated companies, but we expect upside rating momentum will likely be more muted as homebuilders draw down their sizable cash balances (a primary support to liquidity over the past few years), and raise additional debt capital for future land and inventory investment in anticipation of higher sales volumes. The effect of this additional debt issuance will likely slow the leverage improvements necessary for more positive rating actions over the next 12 months.
We also remain concerned that the impact of a potential recession in the U.S. would be more significant for homebuilders than many other sectors, since a drop in consumer confidence would likely derail buyers’ appetite for large discretionary purchases such as single-family homes. In addition, decisions on numerous regulatory and policy initiatives that would have an impact on housing are slated for the first half of 2013, many of which could significantly affect the availability and cost of mortgage financing.
Click here, to read the full report.
Housing to See 'Sustained Growth' According to Fannie Mae
The housing market is “on a
sustained growth path,” according to the latest economic outlook by
Fannie Mae’s Economic & Strategic Research Group. The report shows "One of the key developments for the housing market last year was the
general consensus that home prices, on a national basis, bottomed
earlier in the year and continued to build momentum, exhibiting robust
year-over-year gains unseen since the housing boom."
Housing inventories are at the lowest since December 1994 and fewer distressed homes have helped to lift home prices, according to Fannie Mae economists.
Among some of Fannie Mae economists projections for this year:
Home prices: Fannie Mae economists predict that the median price of existing homes will increase 2.3 percent on an annual basis this year, reaching $181,000. The median price of a new home will likely increase 1.6 percent to $248,000. For 2014, economists predict that home prices will increase an extra 2.8 percent.
Home sales: Existing-home sales will likely rise 11.5 percent in 2013, and new-home sales will rise 12.5 percent, economists predict.
Mortgage rates: Rates will likely edge up slightly this year with 30-year fixed-rate mortgages projected to average 3.8 percent this year and rise to 4.4 percent in 2014.
Source: “Fannie Mae: Housing is 'on a Sustained Growth Path
Housing inventories are at the lowest since December 1994 and fewer distressed homes have helped to lift home prices, according to Fannie Mae economists.
Among some of Fannie Mae economists projections for this year:
Home prices: Fannie Mae economists predict that the median price of existing homes will increase 2.3 percent on an annual basis this year, reaching $181,000. The median price of a new home will likely increase 1.6 percent to $248,000. For 2014, economists predict that home prices will increase an extra 2.8 percent.
Home sales: Existing-home sales will likely rise 11.5 percent in 2013, and new-home sales will rise 12.5 percent, economists predict.
Mortgage rates: Rates will likely edge up slightly this year with 30-year fixed-rate mortgages projected to average 3.8 percent this year and rise to 4.4 percent in 2014.
Source: “Fannie Mae: Housing is 'on a Sustained Growth Path
Freddie Mac Update: Mortgage Rates Steady
Results showed that the 30-year fixed-rate mortgage (FRM) averaged 3.52 percent with an average 0.7 point for the week ending March 7, 2013, up from last week when it averaged 3.51 percent.
Last year at this time, the 30-year FRM averaged 3.88 percent. Additionally, the 15-year FRM this week averaged 2.76 percent with an average 0.7 point, the same as last week. A year ago at this time, the 15-year FRM averaged 3.13 percent. The survey shows that the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.63 percent this week with an average 0.5 point, up from last week when it averaged 2.61 percent. A year ago, the 5-year ARM averaged 2.81 percent.
The 1-year Treasury-indexed ARM averaged 2.63 percent this week with an average 0.3 point, down from last week when it averaged 2.64 percent. At this time last year, the 1-year ARM averaged 2.73 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for the Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.
“With gross domestic product growing only 0.1 percent in the fourth quarter of 2012, inflation remains at bay and consequently mortgage rates low,” says Frank Nothaft, vice president and chief economist, Freddie Mac. In fact, the price index of personal consumption expenditures rose only 0.1 percent in January which was below the market consensus forecast. Moreover, these low mortgage rates are helping to revive the housing market. For instance the CoreLogic® home price index rose 9.7 percent between January 2012 and 2013, marking the largest annual increase since April 2006.”
For more information, visit www.FreddieMac.com
Housing Predictions for 2013
The national housing market made a strong rebound in 2012 and that positive trend is expected to continue in the New Year, according to RE/MAX Co-Founder and Chairman Dave Liniger. His 2013 Top 10 predictions are listed below. According to Liniger, “Although interest rates have been at historic lows, they have not been the driving force behind this recovery. There’s no single factor driving this market; it’s been a combination of low prices, low inventory, improving consumer confidence and a huge pent-up demand. That was true throughout 2012 and will continue to be true in 2013.”
Many consumers now understand what real estate professionals have known for the last year, a number of related factors have combined to create a favorable opportunity for homebuyers and investors to purchase residential properties. “The 2013 situation is so unique that those of us who’ve worked in real estate for many years have never seen opportunities like this,” Liniger added.
Dave Liniger’s Top 10 Real Estate Predictions for 2013 are:
1. More buyers and sellers come back to the market.
2. Homes sales will rise by 6-7 percent and prices rise by 3-4 percent.
3. The inventory of homes for sale will hit a bottom.
4. Higher priced homes begin to sell.
5. Distressed property numbers continue to fall.
6. Shadow inventory continues to fall.
7. The number of short sale closings will rise to a peak.
8. Record low mortgage rates rise slightly by year-end.
9. Lending remains tight.
10. Home affordability remains the best in years.
While Liniger feels that 2013 could be the best year in real estate in many years, he admits that the recovery is fragile and still faces some obstacles. In his video presentation, he states that tight lending, government regulation and the overall economy still have the potential to negatively impact housing. However, Liniger also believes that “if housing can stay on the road to recovery, it’s possible that it can pull the rest of the economy along with it.”
In recent years, Liniger has been a highly vocal advocate for the home buying and selling consumer, and real estate professionals. He has supported reforms aimed at helping troubled homeowners avoid foreclosure and streamlining the Short Sale process. In October, his open letter to candidates Obama and Romney called for a continuation of mortgage interest deductions, an extension of the Debt Relief Act and more reasonable regulations on mortgage lending. The Fiscal Cliff Agreement left the deductions mostly intact and extended the Debt Relief Act until the end of 2013. These moves support the American dream of home ownership, help distressed families avoid foreclosure and promote a sustainable housing recovery.
Source:Rismedia
Many consumers now understand what real estate professionals have known for the last year, a number of related factors have combined to create a favorable opportunity for homebuyers and investors to purchase residential properties. “The 2013 situation is so unique that those of us who’ve worked in real estate for many years have never seen opportunities like this,” Liniger added.
Dave Liniger’s Top 10 Real Estate Predictions for 2013 are:
1. More buyers and sellers come back to the market.
2. Homes sales will rise by 6-7 percent and prices rise by 3-4 percent.
3. The inventory of homes for sale will hit a bottom.
4. Higher priced homes begin to sell.
5. Distressed property numbers continue to fall.
6. Shadow inventory continues to fall.
7. The number of short sale closings will rise to a peak.
8. Record low mortgage rates rise slightly by year-end.
9. Lending remains tight.
10. Home affordability remains the best in years.
While Liniger feels that 2013 could be the best year in real estate in many years, he admits that the recovery is fragile and still faces some obstacles. In his video presentation, he states that tight lending, government regulation and the overall economy still have the potential to negatively impact housing. However, Liniger also believes that “if housing can stay on the road to recovery, it’s possible that it can pull the rest of the economy along with it.”
In recent years, Liniger has been a highly vocal advocate for the home buying and selling consumer, and real estate professionals. He has supported reforms aimed at helping troubled homeowners avoid foreclosure and streamlining the Short Sale process. In October, his open letter to candidates Obama and Romney called for a continuation of mortgage interest deductions, an extension of the Debt Relief Act and more reasonable regulations on mortgage lending. The Fiscal Cliff Agreement left the deductions mostly intact and extended the Debt Relief Act until the end of 2013. These moves support the American dream of home ownership, help distressed families avoid foreclosure and promote a sustainable housing recovery.
Source:Rismedia
Mortgage Rates Rise after Fed Announcement
With
little progress on the fiscal cliff talks and few surprises in this
week's economic data, the Fed meeting was this week's big story. Policy
changes announced in Wednesday's Fed statement raised investor concerns
about higher future inflation, and resulted in mortgage rates ending the
week a little higher.
The
Fed announcement contained two major policy changes. The first, which
was widely expected, is that the Fed will purchase $45 billion per month
of long-term Treasury securities beginning at the start of 2013 to
replace the Operation Twist program which expires at the end of this
year. This will be in addition to the $40 billion of mortgage-backed
securities (MBS) that the Fed now purchases monthly. The second change
from the Fed was not expected. For the first time, the Fed announced
that it will keep the fed funds rate at very low levels until certain
economic targets are reached. Specifically, the fed funds rate will
remain low until unemployment falls below 6.5% and inflation tops 2.5%.
Despite
four years of extraordinary levels of Fed stimulus, the economic data
released this week revealed that inflation is not a problem right now.
This week's data showed that Core CPI, the most widely followed measure
of inflation, was only 1.9%. The concern for investors after the Fed
statement is that the Fed appears to be willing to tolerate a higher
level of inflation in its efforts to boost the economy, and inflation is
negative for mortgage rates.
Source:Marshall Moody at Bluebonnet Capital Mortgage
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